Valley Doesn't Get Its Share Of Business From Uncle Sam

October 29, 1989|by CHARLES A. JAFFE, The Morning Call

Jeanette Slaw of J&R Slaw Inc. in Parryville doesn't think of herself as a defense contractor.

Her company's business is pre-cast concrete.

"I don't know why we'd be on a list of defense contractors," said Slaw, when informed her company appeared on U.S. Department of Defense records as having won $363,000 in prime contract business during fiscal 1988. "We don't do that kind of stuff. We did do one job for the Navy, building keel blocks - something the Navy uses to balance a ship when it's in dry-dock.

"That was good work, and we went in search of other Navy work, but we're not on any of the bid lists and we don't get that information, so it's hard to get those contracts."

With the U.S. government being the world's largest consumer and the military taking a dominant chunk of that money, being a defense contractor does not necessarily mean making weapons and fighting machines. But in the Lehigh Valley, the growth of defense business has been stunted by company executives who either don't consider themselves potential military contractors or who fear the paperwork and potential hassles involved in doing business with the government.

As a result, the Lehigh Valley business community is missing out on millions of dollars of potential defense-business income.

An economic analysis report prepared for the Private Industry Council of the Lehigh Valley in 1987 shows that, using 1984 data, the Lehigh Valley lags far behind other parts of the state, Northeast and United States in terms of federal contract dollars awarded per capita. The Lehigh Valley level, at the time, was roughly one-third of the level for Pennsylvania as a whole and one- sixth the national standard.

During the government's fiscal 1988, ended Sept. 30, Lehigh County ranked 28th in the state in terms of prime defense contract dollars awarded to local companies, with a total of just $9.4 million, according to information supplied by the Defense Technical Information Center in Washington. Northampton County ranked 25th, with $14 million in prime contracts.

Such statistics tend to under-report defense business, as they include only prime contracts. In addition, the statistics include an entire program during the year it is awarded, so if a business wins a $100 million contract spread out over five years, the entire $100 million would appear during the fiscal year it is awarded, and not over the five years during which it benefits the company. For this reason, both Bethlehem Steel Corp. and Mack Trucks Inc., were left off of the 1988 list after winning fairly sizable contracts in fiscal 1987.

"People can say it's faulty data, but it would also be faulty for other areas," explained Charles E. Anderson, manager of government systems for Air Products & Chemicals Inc. in Trexlertown. Air Products, on the list with just under $1 million in defense awards during fiscal 1988, typically does roughly $50 million a year in government business, the bulk of it with NASA and the Department of Energy, rather than in the defense sector. "We have a lot of people who are subcontractors, but so do those other places. And when you compare our statistics to Lancaster, Scranton, northern Philadelphia or Baltimore, we don't stand up to any of them," Anderson said. "Given the size of our area, we just don't get a heck of a lot of government contract awards."

Local executives who either work with the government or help companies looking to do defense business say area businesses generally don't pursue defense work for one of several reasons.

One is that executives fear the paperwork and hassles involved in pursuing government contracts.

"People at the Tobyhanna Army base have told us that they can't even get area people to bid on contracts to paint buildings and things like that," said Mark Lang, executive director of the Northeast Tier Ben Franklin Advanced Technology Center at Lehigh University in Bethlehem. "Business like that winds up going to people from out of state, because local people don't think about doing defense work. There is no question that local companies could get that business, but they don't go after it.

"The process is imposing for those who haven't been through it," Lang added. "On certain contracts, you have to prove that you meet certain standards. And if everything is not quite right, the government can just throw your paperwork away. But there are resources to help people learn the process and take a lot of the mystery out of it."

A second reason is that executives at companies not making traditional military products don't perceive their companies as potential defense contractors and don't envision the government having a need for their goods or services.

Slaw is a good example. Friends and sources alerted her to the Navy job; without those contacts, the company never would have made a bid.